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As agencies grapple with a record federal deficit, declining budgets and investment delays that come with a presidential transition, information technology is being seen as a sure way to streamline operations. The concept of doing more with less drives innovation, according to Brian Stevens, chief technology officer at Red Hat, an open source software company. "If you have a lot of money in your pocket, you value the dollar less, [but] when budgets are not flush with cash, agencies are forced to scrutinize their decision-making," he says.

Cloud computing is one strategy that is getting attention - even as it baffles many. As one GSA official said during a panel discussion in December, "Cloud computing holds a lot of promise if only people could come up with a clear definition for what it actually is."

Here's a simple definition: Cloud computing is a method of supplying computer users with IT resources on demand through the Internet. It allows agencies to buy the amount of power and storage they need, typically from contractors that own and maintain the associated hardware, and reduce costly servers in their data centers. When agencies no longer require the IT tools, they're returned to "the cloud" for other users to tap.

Economies of Scale

"There's a lot of buzz around this concept of cloud services, but by definition, it's simply a scalable style of computing," says Yogesh Khanna, vice president of IT infrastructure solutions for North American public sector business at IT consulting firm Computer Sciences Corp. "You buy IT primarily as services, not solutions, which can be leveraged across multiple clients."

Further driving down costs, cloud computing environments often are based on software whose source code is available to the public for free. Unlike proprietary software, open source software can be modified and redistributed. Users can manipulate these tools to develop or change Web applications on the fly.

"Open source makes it easier to quickly develop applications that just work," Stevens says. "That's important now more than ever, because spending has gotten out of control and agencies can't just absorb technologies."

Cloud computing also can help centralize management, John Grimes, former chief information officer for the Defense Department, said in a May speech sponsored by the American Council for Technology and the Industry Advisory Council. With cloud computing, workstations become dumb terminals that rely more on shared applications and databases. By housing less software on the computers, users would introduce fewer security vulnerabilities, Grimes said.

Believers and Skeptics

"One reason you see a lot of discussion about clouds but virtually no traction, is the fundamental barrier of security that is not necessarily a barrier," CSC's Khanna says.

Agencies question the security of a computing model built on a concept of sharing resources. The solution, Khanna says, is a trusted environment that isolates the cloud through physical and data security requirements and appropriate clearances. The federal cloud could be managed by agencies, a contractor, or both. In a hybrid model recently announced by federal contractor Apptis, agencies maintain their existing infrastructure, but tap the cloud when a surge in resources is necessary - to collaborate with state and local authorities during a homeland security disaster, for example.

The Defense Information Systems Agency is involved in one of few examples of cloud computing in government. In October, the agency launched the Rapid Access Computing Environment, which allows Defense IT developers to test applications before they go live. The applications are stored at a DISA data center, and customers pay the agency only for the computing resources they need when they need them.

The model drives standardization, according to Alfred Rivera, director of DISA's Center for Computing Services. Users no longer have one-off solutions, but instead work from the same base architecture. He said the concept could extend beyond testing to production, in which agencies ultimately would outsource to DISA the management and support of live applications and computing processes.

Cloud computing could help agencies deploy the Web 2.0 technologies so heavily touted by President Obama. More and more, agencies are turning to interactive media such as wikis, blogs and online dialogue sites to boost collaboration and service. The challenge is finding ways to finance and support those technologies, which often demand a great deal of bandwidth, and to ensure security. Cloud computing could give users access to tools to develop and support those collaborative applications.

Intellipedia, for example, is the successful online system founded in April 2006 to enable data sharing within the intelligence community. Based on free and open source software, Intellipedia consists of three private wikis for employees with clearances at the 16 intelligence agencies and other national security organizations.

"It's obviously not public and open to the world," Khanna says. "You can have Web 2.0 tools that live in intranets that are enclaves for limited communities."

But the reality is agencies are not quick to make the leap into the next generation of IT. For now, most are consolidating their IT infrastructure and standardizing processes. "When you deploy a departmentwide solution, you don't need to reeducate, because everyone is working off the same system," says Patrick Pizzella, the Labor Department's assistant secretary and CIO. But he remains hesitant about emerging technologies.

"We try to be sure we know what we're doing before we push the send button," Pizzella says. "We watch and listen, but move cautiously. Success is the result of those first couple of years where we roll up our sleeves and try to find the right solutions."